Notes to the Financial Statements (Group)
- 6 Product revenue information
- 7 Property, plant and equipment
- 8 Goodwill
- 9 Intangible assets
- 10 Other investments
9 Intangible assets
| |
Product, marketing and distribution rights $m |
Other intangibles $m |
Software development costs $m |
Total $m |
|---|---|---|---|---|
| Cost At 1 January 2006 |
2,803 | 503 | 649 | 3,955 |
| Additions – through business combinations | 1,260 | 281 | – | 1,541 |
| Additions – separately acquired | 413 | 51 | 121 | 585 |
| Disposals | (675) | (4) | – | (679) |
| Exchange adjustments | 372 | 79 | 16 | 467 |
| At 31 December 2006 | 4,173 | 910 | 786 | 5,869 |
| Additions – through business combinations | 6,946 | 1,477 | – | 8,423 |
| Additions – separately acquired | 299 | 33 | 178 | 510 |
| Disposals | (52) | (82) | – | (134) |
| Exchange adjustments | 183 | 47 | 12 | 242 |
| At 31 December 2007 | 11,549 | 2,385 | 976 | 14,910 |
| Additions – separately acquired | 2,743 | 20 | 178 | 2,941 |
| Disposals | – | (33) | (30) | (63) |
| Exchange adjustments | (770) | (197) | (133) | (1,100) |
| At 31 December 2008 | 13,522 | 2,175 | 991 | 16,688 |
| Amortisation and impairment losses At 1 January 2006 |
1,433 | 357 | 406 | 2,196 |
| Amortisation for year | 250 | 25 | 50 | 325 |
| Disposals | (14) | (4) | – | (18) |
| Impairment | – | 17 | – | 17 |
| Exchange adjustments | 190 | 48 | 4 | 242 |
| At 31 December 2006 | 1,859 | 443 | 460 | 2,762 |
| Amortisation for year | 364 | 112 | 78 | 554 |
| Disposals | (52) | (81) | – | (133) |
| Impairment | 98 | 22 | – | 120 |
| Exchange adjustments | 104 | 32 | 4 | 140 |
| At 31 December 2007 | 2,373 | 528 | 542 | 3,443 |
| Amortisation for year | 529 | 182 | 96 | 807 |
| Disposals | – | (9) | (10) | (19) |
| Impairment | 516 | 91 | 24 | 631 |
| Exchange adjustments | (357) | (104) | (36) | (497) |
| At 31 December 2008 | 3,061 | 688 | 616 | 4,365 |
| Net book value | ||||
| At 31 December 2006 | 2,314 | 467 | 326 | 3,107 |
| At 31 December 2007 | 9,176 | 1,857 | 434 | 11,467 |
| At 31 December 2008 | 10,461 | 1,487 | 375 | 12,323 |
Other intangibles consist mainly of licensing and rights to contractual income streams.
Additions in the year
Included in additions in the year is an amount of $2.6bn for a payment made to Merck & Co., Inc (‘Merck’). The payments consisted of payments for product rights and non-refundable deposits. Further details of this payment, including the background to the transaction and further payments that may be made under the agreements between AstraZeneca and Merck are included in Note 25.
Amortisation charges are recognised in the income statement as follows:
| |
Product, marketing and distribution rights $m |
Other intangibles $m |
Software development costs $m |
Total $m |
|---|---|---|---|---|
| Year ended 31 December 2008 | ||||
| Cost of sales | 39 | – | – | 39 |
| Research and development | 10 | – | – | 10 |
| Selling, general and administrative costs | 480 | 35 | 96 | 611 |
| Other operating income and expense | – | 147 | – | 147 |
| 529 | 182 | 96 | 807 | |
| Year ended 31 December 2007 | ||||
| Selling, general and administrative costs | 364 | 27 | 78 | 469 |
| Other operating income and expense | – | 85 | – | 85 |
| 364 | 112 | 78 | 554 | |
| Year ended 31 December 2006 | ||||
| Selling, general and administrative costs | 250 | 13 | 50 | 313 |
| Other operating income and expense | – | 12 | – | 12 |
| 250 | 25 | 50 | 325 |
Impairment charges are recognised in the income statement as follows:
| |
Product, marketing and distribution rights $m |
Other intangibles $m |
Software development costs $m |
Total $m |
|---|---|---|---|---|
| Year ended 31 December 2008 | ||||
| Cost of sales | 115 | – | – | 115 |
| Research and development | 144 | – | – | 144 |
| Selling, general and administrative costs | 257 | – | 24 | 281 |
| Other operating income and expense | – | 91 | – | 91 |
| 516 | 91 | 24 | 631 | |
| Year ended 31 December 2007 | ||||
| Research and development | 98 | 22 | – | 120 |
| Year ended 31 December 2006 | ||||
| Research and development | – | 17 | – | 17 |
Amortisation and impairment charges
The 2008 impairment of product, marketing and distribution rights result, in part, from the settlement of the Pulmicort Respules patent litigation with Teva ($115m) and the “at risk” launch of a generic competitor to Ethyol ($257m). The write down in value of the intangible assets in relation to these products was determined based on value in use calculations using discounted risk-adjusted projections of the expected products’ cash flows over a period reflecting the patent-protected lives of the individual products. The full period of projections are covered by internal budgets and forecasts. In arriving at the appropriate discount rate to use for each product, we adjust AstraZeneca’s post-tax weighted average cost of capital (7.6% for 2008) to reflect the impact of risks and tax effects specific to the individual products. The weighted average pre-tax discount rate we used was approximately 14%.
The remaining $144m impairment of product, marketing and distribution rights results from the termination of development projects during the year.
The 2008 impairment of other intangibles results from a reassessment of the future royalties expected to be received relating to the HPV cervical cancer vaccine. This impairment charge was determined using value in use calculations applying the same considerations as applied to the write down of Pulmicort Respules and Ethyol detailed above.
The impairment in 2007 was in relation to the termination of a product in development acquired with MedImmune and four collaboration agreements.
The impairment in 2006 was in relation to the termination of NXY-059 and a collaboration agreement.
Significant assets
| |
Description |
Carrying value $m |
Remaining amortisation period |
|---|---|---|---|
| Intangible assets arising from joint venture with Merck1 | Product, marketing and distribution rights | 262 | 5 and 9 years |
| Advance payment1 | Product, marketing and distribution rights | 528 | 10 years |
| Partial retirement (non–refundable deposit)1 | Product, marketing and distribution rights | 1,656 | Not amortised |
| Partial retirement1 | Product, marketing and distribution rights | 840 | 13-19 years |
| Intangible assets arising from the acquisition of CAT | Product, marketing and distribution rights | 398 | 7 and 12 years2 |
| Intangible assets arising from the acquisition of KuDOS | Product, marketing and distribution rights | 285 | Not amortised2 |
| RSV franchise assets arising on acquisition of MedImmune3 | Product, marketing and distribution rights | 5,161 | 17-23 years2 |
| Intangible assets arising from the acquisition of MedImmune3 | Licensing and contractual income | 1,103 | 1-12 years |
1These assets are associated with the restructuring of the joint venture with Merck & Co., Inc. Further information can be found in Note 25.
2Assets in development are not amortised but are tested annually for impairment.
3An allocation of the cost of these assets to Therapy Area is given in Note 22.
